Econometer: Is a flat tax folly or foolproof?

FILE - In this Oct. 22, 2011 file photo, Republican presidential candidate, businessman Herman Cain speaks in Des Moines, Iowa. The flat tax is making a comeback among Republican presidential candidates. Most of the contenders _Mitt Romney's an exception _ offer a variation of the tax plan under wh

/ AP

FILE - In this Oct. 22, 2011 file photo, Republican presidential candidate, businessman Herman Cain speaks in Des Moines, Iowa. The flat tax is making a comeback among Republican presidential candidates. Most of the contenders _Mitt Romney's an exception _ offer a variation of the tax plan under which everyone pays the same rate. But a flat tax faces tough opposition in Congress because it tends to favor the rich at the expense of others. (AP Photo/Nati Harnik, File)

FILE - In this Oct. 22, 2011 file photo, Republican presidential candidate, businessman Herman Cain speaks in Des Moines, Iowa. The flat tax is making a comeback among Republican presidential candidates. Most of the contenders _Mitt Romney's an exception _ offer a variation of the tax plan under which everyone pays the same rate. But a flat tax faces tough opposition in Congress because it tends to favor the rich at the expense of others. (AP Photo/Nati Harnik, File) (/ AP)

Q: Is a federal flat tax a good alternative to the current progressive income tax system?

Panel's answer: 5 yes, 3 no

The question:

Marney Cox, San Diego Association of Governments

Marney Cox

Marney Cox

Marney Cox

Answer: Yes

As an alternative, the flat tax is a less destructive and less intrusive way of collecting revenue to fund government. There are at least three elements of the flat tax that make it more attractive than the current system. First, all forms of employee and business income are taxed, broadening the base; today over half of all business income and all fringe benefits are not taxed. Second, the flat tax eliminates the double taxation of income earned by business and paid out to shareholders (think more funds for retirement accounts). Third, the flat tax would lower interest rates by eliminating the tax deduction for interest paid and the tax on interest earned.

Kelly Cunningham, National University Systems

Kelly Cunningham

Kelly Cunningham

Kelly Cunningham

Answer: Yes

The simplicity, fairness and transparency of a flat tax system are vastly preferable to the current monstrosity. Ending the widespread and corrupt practice of inserting loopholes and preferences into the tax code for politically connected entities would be a much more equitable system for everyone. Eliminating deductions, shelters, exemptions, and other distortions in the tax code that upper-income taxpayers far more often utilize could actually generate more revenues. Stronger incentives for productive behavior would also result from lower taxes on work, savings, investment, and entrepreneurship, with decisions made on the basis of good economics rather than clever tax planning.

Alan Gin, University of San Diego

Alan Gin

Alan Gin

Alan Gin

Answer: No

A flat tax would make the already growing income inequality even worse, as high-income earners benefit more than low-income ones. A flat tax is often advocated in the name of tax simplification. But looking up a progressive tax in a table or calculating it is easy; it’s the myriad of deductions that makes taxes complicated. Even the father of free market economics, Adam Smith, expressed some support for progressive taxation: “It is not very unreasonable that the rich should contribute to the public expense, not only in proportion to their revenue, but something more than in that proportion.”

The income gap between the richest 20 percent and poorest 20 percent of Americans has increased significantly over the last 30 years, and I think that has been a factor in a number of the problems we face today. Moving from our current system to a flat tax would lower tax rates on the rich and raise them on the poor, which is the opposite of what we really should be doing. I am deeply skeptical of claims that a flat tax would increase economic growth rates -- the rising inequality of the last decade has hardly been a period of robust growth.

Gary London, The London Group Realty Advisors

Gary London

Gary London

Gary London

Answer: Yes

But only in the sense that any refinement to the tax system which simplifies it must be good. Simplification can also be accomplished with a valued added tax (VAT) because consumption is largely a choice (exceptions being your house, food, education and transportation). A flat tax puts a disproportionate burden on the lower income earners at the very moment when many are struggling. But a flat tax also might plug up the loopholes exploited by many who effectively pay no income tax. But, our economic ills are not likely to be solved by any tax alternative. Let us not divert the fiscal argument to a tax argument when the entitlement cuts need to be on the center stage.

Norm Miller, University of San Diego

Norm Miller

Norm Miller

Norm Miller

Answer: Yes

If we can start the flat tax at a high enough minimum income level so as to not be too regressive a system. Plans like 9-9-9 are extremely regressive (hurts lower income households more) since relative consumption declines at higher incomes, but a flat income tax can work. Everyone knows the current system is too complicated and that higher income households use deductions to bring effective tax rates down. With a flat tax rate there will be less cheating and less black market economic activity, so more income will be revealed.

Lynn Reaser, Point Loma Nazarene University

Answer: No.

Most Americans are not willing to accept a system where higher and lower income earners would pay the same rate. They do support a major simplification of the current 3.4 million-word tax code. Broadening the tax base by eliminating the labyrinth of deductions and exemptions could both reduce all tax rates and raise revenues. The corporate tax rate should be reduced from the present 35 percent, which is the highest in the world. The double taxation of capital gains and dividends (currently taxed as profits at the company level and as income when distributed to shareholders) should also be ended.

Dan Seiver, San Diego State University

Dan Seiver

Dan Seiver

Dan Seiver

Answer: Yes

Our current income tax system is inefficient, inequitable and too complex. We have used the tax code for dubious social engineering and to benefit powerful interest groups. Reform and simplification are long overdue. But a straight 9-9-9 flat tax will increase the overall tax burden on poor people and reduce it for most rich people, and probably not generate enough revenue. A 20 percent flat tax, with exemptions for the poor, and a few key deductions retained, would be fairer and more workable, but the practical difficulties abound. Why should there be any deductions? I think Americans would support a simple progressive tax (say 10-20-30) with no deductions, which would save us billions of work hours wasted on tax preparation, avoidance and evasion, and put a lot of lobbyists out of work.